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Labor [L=# of employees] Output [Q= total number of lawns cut each week during the 20-week lawn cutting season] Fill in the rest of the chart and answer the questions below: Fixed variable costs Marginal Cost material L 0 2 4 6 8 3. The business It is a competitive market that is in operation 20 weeks out of the year. Landscape Service (cutting lawns) The equilibrium price of the service is $15 You have taken out a bank loan to purchase 5 machines and one truck. Your monthly loan payment (every month) is $200. Hiring an employee costs $250/week (including all payroll taxes) Gasoline and other supplies costs $2.00 per lawn The city charges $500/year for a permit to operate this business. The technical relationship: 10 12 2. Q 0 40 100 150 190 220 240 Marginal Output Cost MQ FC VC VC Total Total labor Cost Revenue TC TR 1. With which worker do you first experience diminishing returns to labor? Profit What is the profit maximizing level of output (How many lawns will you cut)? How much profit will you make at the best output level? MC 4. Using the marginal cost column: At what price for lawn service would the entrepreneur be willing to hire the 11th and 12th workers and expand production to 240 customers? Labor [L=# of employees] Output [Q= total number of lawns cut each week during the 20-week lawn cutting season] Fill in the rest of the chart and answer the questions below: Fixed variable costs Marginal Cost material L 0 2 4 6 8 3. The business It is a competitive market that is in operation 20 weeks out of the year. Landscape Service (cutting lawns) The equilibrium price of the service is $15 You have taken out a bank loan to purchase 5 machines and one truck. Your monthly loan payment (every month) is $200. Hiring an employee costs $250/week (including all payroll taxes) Gasoline and other supplies costs $2.00 per lawn The city charges $500/year for a permit to operate this business. The technical relationship: 10 12 2. Q 0 40 100 150 190 220 240 Marginal Output Cost MQ FC VC VC Total Total labor Cost Revenue TC TR 1. With which worker do you first experience diminishing returns to labor? Profit What is the profit maximizing level of output (How many lawns will you cut)? How much profit will you make at the best output level? MC 4. Using the marginal cost column: At what price for lawn service would the entrepreneur be willing to hire the 11th and 12th workers and expand production to 240 customers?
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1The first worker experiences diminishing returns to labor at the output level of 40 The first worker experiences diminishing returns to labor at the ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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